Posts Tagged ‘national-debt’

We have heard so much bad economic news that most people believe it, even though it is not true.The economy has recovered to the point that the economic stimulus is being ended. That would normally be good news. It is strange that it has not been widely disseminated and many people may be unaware of it. You may read a little piece here and there in the paper about it, but it hasn’t seemed to enter the public’s mind. Actually, since it would help the Democrats, great efforts have been made by some money interests and obstructionists to downplay the recovery.

The chart at the right summarizes the recovery in the last five years. Though it was put together by the Occupy Democrats, the numbers seem to be accurate and can be checked. Normally the President would get credit for the recovery, but not so much in this case as it would likely help the Democrats in the next election. The news could probably have been even better except for the missed opportunities caused by obstructionists in Congress. I hope some of them will join the jobless after the next election.

The federal debt has been one of the most divisive issues in Congress, leading to cuts in public welfare, near default on our debts, and a sequester agreement which has hurt almost every segment of our economy. Yet, we have not adequately addressed two of the largest expenses, which could be reduced without sacrificing our security or our safety net programs. The graph below reports the way our country spends its money.

Interest on the public debt is one of our largest expenses and one that could easily be addressed. That could be addressed by restoring a progressive tax rate, by cutting tax loopholes, and by removing subsidies to profitable industries and the wealthy. Congress cannot seem to act on raising taxes as many of the Legislators have signed on to Grover Norquist’s pledge not to raise taxes. Senator Tom Coburn, in his Back in Black report , has identified many of the porkbarrel programs that could be cut if Congress had the will to do so.

The second area could be cut is military spending. The graph below shows the military spending by country. The United States spends five times as much as any other country, and as much as the next 10 countries put together on defense. We certainly need to defend our country, however, we still invest a tremendous amount of money in military hardware which is mostly useless against our greatest threat, which is terrorism. Why do we do so? President Dwight Eisenhower warned us in his farewell speech,

“My country wants to be constructive, not destructive. It wants agreement, not wars, among nations. In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex.”

The military–industrial complex refers to the policy and monetary relationships which exist between legislators, the armed forces, military contractors, and the military industrial base that supports them. These relationships include political contributions, political approval of military spending, and lobbying to support military bureaucracies and weaken oversight of the industry. We have not followed Ike’s advice, as we have allowed the military-industrial complex, in the name of providing security, to gobble up a large share of our national spending. We need to shift our resources to intelligence and diplomacy to combat terrorism, and away from the much more expensive, and much less necessary, conventional military spending.

It should be possible to eventually reduce our expenses for social programs, but not while we are still recovering from a recession which has greatly increased the need for public assistance. To justify that I will quote Eisenhower again:

“To blend, without coercion, the individual good and the common good is the essence of citizenship in a free country. Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed.”

We all have different ideas about what is a fair tax policy and a fair distribution of wealth. Below are some pictures and graphs which show that conventional wisdom may not give us a clear picture of the facts – and that we may need to reconsider what is actually fair.

State Taxes: Last year, Oklahoma cut state taxes and is considering another tax cut. The graph below is the data for Oklahoma from the Institute on Taxation and Economic Policy . It shows that those in the lowest income group pay the highest percentage of their income in taxes. The 2012 Oklahoma tax cuts skewed the distribution even more, as 75% of the tax cuts went to the top 20% in income. You may look up the data for your state at the link above. The tax cuts in Oklahoma, and perhaps in your state, were justified by using Laffer’s economic theory, though the theory apparently fails in practice.

Distribution of Wealth: The graph below compares what people consider the ideal distribution of wealth, with how they think wealth is distributed. Both are very different from the actual distribution of wealth. Taxation and spending policies have greatly contributed to this distribution of wealth.

National Debt: Taxation and spending policies greatly affect our national debt. The graph below, from the CBO, shows how the surplus projected in 2001, the top red line, was decreased by the weakening economy, tax cuts, and spending decisions. The stimulus accounted for 6% of the decrease and Obama’s policies for 8%.

Tax Rates: This chart gives some historical perspective on the top marginal tax rates. Those in the top income bracket have been enjoying the lowest tax rates since World War II.

Spending: The conventional wisdom is that our current deficit is because of increasing government spending. That is not borne out by the data.

The Deficit: Though there have been many claims about our growing deficit, the deficit has actually been shrinking as a share of the GDP.

Ancient Wisdom: Aristotle thought that nature, and even politics, could best be understood by observations and reason. In the fifth century BC, Aristotle compared the democracy in Athens with other forms of government and warned against a major flaw in democracy. If the poor gain too much power, they will vote too many benefits for themselves and will deplete the treasury. If the rich gain too much power, they will use that power to further enrich themselves, leaving too many of the citizen’s poor. Aristotle thought democracy was only a viable form of government if there was a strong middle class.

Economics is not the only issue in most elections, and many people vote for a candidate based on social issues, sometimes without considering that the candidate may make decisions against their best economic interests. Perhaps it’s time we put divisive social issues aside for awhile, and work on restoring the economic balance in our society. Our education system, our infrastructure, our health, and our economic well-being all depend heavily on our taxation and spending policies. Although economic imbalance may be becoming a threat to our democracy, that can be changed if we will become informed and

This link is to a Tulsa World Cartoon showing Congress playing President Obama like a fiddle. Many who commented on it used it as an excuse to criticize Obama. They need to stop and think.

Yes, Congress is playing Obama like a fiddle. However, it reminds me of the story of Solomon. When two women came before him, both claiming the same son, Solomon ordered the boy cut in two and each woman given half. When one woman, cried “No”, she would give up her claim, Solomon awarded her the child, as she obviously cared more for it.

When Congress demanded Obama extend the tax cuts or they would cut benefits to the unemployed, Obama compromised. When Congress would have let us default on our debts, causing untold damage to our financil institutions and our citizens, Obama compromised. You may criticize Obama for compromising, but I think it is clear who cares more for America.